ANZ cuts mortgage rates to catch up

ANZ Banking Group
is matching the lower mortgage rates of other banks, quietly offering discounts for attractive customers to help keep pace with the mortgage growth achieved by price leader
National Australia Bank
.

Brokers also report
Suncorp
and
Bendigo and Adelaide Bank
are competing heavily to pick up mortgage customers.

The Reserve Bank of Australia’s decision on rates today, which most economists predict will be a rise of 0.25 of a percentage point in the official cash rate, provides banks with the first chance since May to reset their competitive positioning.

Since last December NAB has consistently had the cheapest mortgages, followed by
Commonwealth Bank
, then ANZ, while
Westpac
is the most expensive of the big four.

Despite ANZ being the second most expensive it has managed to grow its mortgage book by almost as much as NAB. But brokers have told The Australian Financial Review ANZ is willing to discount for some customers down to a rate equal to that offered by second-cheapest CBA.

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“If you’re a lawyer, an accountant, a doctor, any of the professional types, then we’re getting some good discounts from ANZ," said one broker, who declined to be named.

Mark Hewitt, general manager of sales and operations at Australian Finance Group, a large mortgage broker, said ANZ was performing very strongly in the broker market but this had less to do with price and more to do with other factors.

“They are probably a little more relaxed on credit and the reason they can do that is they were the first bank to move on loan-to-value ratios during the first-home buyers boom," Mr Hewitt said.

“They tightened up straight away and during that period when Westpac and CBA were lending heavily they weren’t involved.

“Now 12 months later they’re in a position where they haven’t got their book full of first-home owner loans and they can afford to be a little more relaxed."

Credit Suisse analysis of data collected by the Australian Prudential Regulation Authority shows that in the four months to August 31, ANZ had grown its share of the mortgage market by 0.25 of a percentage point, compared to NAB’s 0.33 of a percentage point.

In the same period Westpac and CBA’s market share shrank.

Credit Suisse noted that the regional banks have stanched the loss in market share they suffered during 2008 and 2009.

Brokers report that both Suncorp and Bendigo and Adelaide Bank are offering competitive rates.

Since the last official rate rise in May, NAB’s standard variable rate (SVR) has been 7.24 per cent, CBA’s has been the second cheapest at 7.36 per cent followed by ANZ on 7.41 per cent and Westpac at 7.51 per cent. Most banks offer a standard discount of 0.7 of a percentage point off their SVR. At NAB the discount ranges from 0.8 of a percentage point to 0.6 of a percentage point depending on how much borrowers have saved towards buying their house.

While ANZ has outperformed NAB in growth terms, NAB’s “risk-based pricing" strategy has allowed it to preserve its skew towards a slightly more affluent customer base.

Two weeks ago CBA moved to get more market share by lowering the threshold for the 0.7 of a percentage point discount to $500,000. A year ago it lifted that threshold up to $700,000.

One broker who spoke to the AFR could not remember the last time she sold a Westpac mortgage. She added that Westpac subsidiary St George had angered many brokers by changing its trailing commissions.